Sean
- Tax efficiency – A financial process (set of transactions) is said to be tax-efficient if it is taxed at a lower rate than an alternative financial process that achieves the same end. An example of tax efficiency is retirement investing using a 401(k) rather than a standard brokerage account. Investing in a 401(k) is more tax-efficient because it is tax-deductible.
- Tax shelter – A tax shelter is a place to legally store money or assets so that current or future tax liabilities are minimized. A tax shelter is a tax minimization strategy, and shouldn’t be confused with the illegal practice of tax evasion. Examples of potential tax shelters include:
- Retirement accounts
- Certain insurance products
- Real estate investments
- Tax evasion – Tax evasion is an illegal activity in which a person or business deliberately avoids paying their true tax liability. It usually entails taxpayers misrepresenting the true state of their financial affairs when they file their taxes.
